Marketing budget growth hit its slowest rate in three years during the third quarter of 2018, according to data captured by the Institute Practitioners in Advertising's latest (IPA) Bellwether report.
The study features original data drawn from a panel of around 300 UK marketing professionals from the UK’s top 1000 firms. Although 21% of marketers said they were upwardly revising investment in Q3, 18% said it was declining; this left a net balance of just 2.5% when it came to recorded growth marking the weakest figure since Q4 2015.
The number also marked a decrease on the 6.5% net growth recorded in Q2 2018. The report attributed this to “a lack of clarity over the UK’s future relationship with the EU after Brexit, alongside rising cost pressures”.
Although UK ad spend is still projected to hit 1.1% growth for the year, a further slowdown is anticipated for 2019, at 0.7%.
Paul Bainsfair, director general, IPA said Brexit uncertainty has spurred marketers into a “cautious” stance. He said members are “inevitably increasingly downcast about their financial prospects.”
Fredrik Borestrom, president of UK Chapter, International Advertising Association agreed the latest report was indicative of uncertain conditions.
"The advertising industry, much like others in the UK, is not surprisingly taking a more cautious approach to budget planning and spending while Brexit negotiations come to a crux," he noted.
"The implications of leaving the EU are high on the agenda for most agencies, brands, and media owners, and there are certainly more discussions taking place about what the tangible impact may be.
"It is encouraging to see that spend in main media is consistent, and increasing in the digital space, but growth is slowing. No matter the outcome of EU talks, we must have a robust strategy in place to ensure we continue to lead the way as a global creative hub, attracting the best advertising talent – Brexit and beyond."
The bigger picture
Notably, main media (TV, radio and cinema) spend remained consistent dropping 0.1% in the quarter to 4.8%. Bainsfair said “solace” could be taken in this fact. “As the evidence shows, main media is the most effective route to building brands," he added.
“At a time when just under two-thirds are pressing pause on their marketing spend, perhaps this provides an opportunity for others to get cut-through and see whether fortune really does favour the brave."
60% of budgets logged in the survey remained unchanged in the quarter, showing that marketers were exerting caution and waiting for the outcome of EU negotiations to blow over before committing capital behind grander initiatives.
Digital spend was up, according to 13.6% of respondents. 5.8% and +1.9% respectively claimed increases in search and SEO spent too. Events marketing was down 1.1% while market research fell 3.7%,. Direct marketing dropped -7.4% and ‘other’ marketing slumped -9.9%.
The report outlined an acceleration of growth from the start of the 2020s however. It also claimed that the UK has enjoyed six years of marketing spend growth.
Joe Hayes, economist at IHS Markit and author of the report, added: "Since the end of 2016, there has been a distinct slowing of growth momentum in UK marketing budgets. Latest Bellwether data revealed further sluggishness, as growing uncertainty towards the UK economy’s outlook as well as rising cost and competitive pressures impact companies’ discretionary spending. Over 60% of the survey panel observed no change in total marketing spend, highlighting indecisiveness and risk-aversion.
“The outlook over the coming three months signalled further woes, with panelists’ assessment of industry-wide financial prospects at the most pessimistic since the end of 2011."
He concluded: "Nonetheless, marketing executives are still being allocated greater expenditure, particularly in the digital space. Strong competition is driving firms to explore new innovative methods to bolster market shares and retain existing clients.”